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Research Reports » Clearstream Jan 2020

Foreword and highlights

Bernard Tancré, Executive Director, Head of Investment Fund Services, Clearstream

Overall success in fund distribution is built on a strong reputation for asset safety, flexible sales mechanisms and high standards of investor protection and efficiency. With distribution contract and commission management being resource-intensive functions in an increasingly low-margin market, pressure on the cost element has placed a premium on transparency and cost efficiency.

In past years, we were seeing acquisitions and partnerships in the platform technology market across Europe and the UK and we expect this trend to continue in years to come. Platforms with sufficient scale, volume and expertise are able to move ahead with large investments in value-added services and competitive end-to-end solutions required to stay relevant in the distribution space.

Management companies and their distribution partners are therefore constantly refining their strategies to preserve competitive advantage and to ensure compliance with regulatory requirements.

In Europe, MiFID II has thrown a spotlight on transparency and cost efficiency and many distributors no longer wish to be managing commission flows through to downstream sales intermediaries with limited financial compensation for doing so. MiFID II is therefore driving greater cost transparency across the fund transaction lifecycle and is forcing the industry to review its charging structures and procedures for cost disclosure. To be successful in future, the majority of survey respondents expect fund platforms to improve compliance data flows across the distribution supply chain.

Clearstream’s new Fund Desk distribution support services address this growing demand by helping asset managers to manage their compliance requirements, such as AML and KYC, including product governance requirements under MiFID II.

The survey has furthermore confirmed that distribution parties continue to push for greater choice of investment products and larger geographical coverage supported on fund platforms that they employ – and for these service enhancements to be delivered against more attractive cost structures.

Assets supported on fund distribution platforms have continued to grow in Europe, the Asia-Pacific region and the US. But what do industry participants understand by the term “fund platform”? Which services do these provide well? And where can these improve the services that they deliver to asset managers, distribution intermediaries and end investors? Funds Europe, in association with Clearstream, surveyed the industry to provide answers to these questions. Among its main findings:

  • 52% of respondents say they understand a fund platform to be an online service offering fund order routing, settlement, asset servicing and distribution support.
  • 85% say that assets supported on fund platforms will increase over the coming three years.
  • 44% say that Europe (ex UK) will experience the largest increase in assets on fund platforms over this three-year timeframe, 28% say it will be in the Asia-Pacific.
  • 48% say the number of platforms offering third-party distribution of investment fund products will increase over the next three years.
  • 52% say fund platforms can deliver most service improvement to asset managers by enhancing support for compliance reporting (e.g. KYC, AML, MiFID II).
  • 58% say fund platforms can deliver service improvement to B2B distribution partners by improving compliance data flows across the distribution supply chain.
  • 74% say that the use of robo-advisory services by fund platforms will increase over the coming three years.
  • 61% say that technology companies will be the primary disruptors of the fund platform market.

This report is the second in a series of collaborative research projects between Funds Europe and Clearstream conducted in 2019. A report on transparency and data communication across the distribution supply chain, entitled Clear Enough: Finding the Best Level of Transparency, was published in June 2019.

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